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Assets & Liabilities
What we own vs what we owe - master the balance sheet
24 TopicsIntermediateIncludes FIFO/LIFO
Current Assets
Assets expected to convert to cash within one year
Inventory
Goods held for sale - a critical current asset
Long-Term Assets
Assets used for more than one year
Property, Plant & Equipment (PPE)
Tangible long-term assets
Depreciation Methods
Straight-line, declining balance, units of production
Accumulated Depreciation
The contra-asset account
Disposal of Assets
Selling, discarding, or trading assets
Intangible Assets
Goodwill, patents, trademarks, and amortization
Current Liabilities
Obligations due within one year
Long-Term Liabilities
Obligations due beyond one year
Stockholders' Equity
The owners' residual interest
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Practice Asset & Liability Transactions
Practice recording inventory, depreciation, and more with interactive exercises in our Learning Lab.
Try It in the Learning Lab→Frequently Asked Questions
FIFO (First-In, First-Out) assumes oldest inventory is sold first, resulting in lower COGS and higher profits during inflation. LIFO (Last-In, First-Out) assumes newest inventory is sold first, resulting in higher COGS and lower taxes during inflation. The choice affects both income and balance sheet values.
Depreciation allocates the cost of a long-term asset over its useful life, matching the expense to the periods that benefit from the asset (matching principle). It doesn't represent actual cash outflow - it's a non-cash expense that reduces taxable income.
Current assets are expected to be converted to cash, sold, or consumed within one year or the operating cycle (whichever is longer). Non-current (long-term) assets provide benefits beyond one year, like equipment, buildings, and patents.